Three- to six-month mini leases fill fleet need for temporary company cars with big potential savings, reports Stephen Briers

Companies have long been vexed over the issues of providing quality cars to starters during probationary periods, to staff on fixed term contracts and as cover for cars ordered on extended lead times.

Solutions have been created in recent years through the growth of medium-term car hire offerings from the main rental companies, but now a new business claims to have developed the ideal alternative.

Meridian Vehicle Solutions was launched a year ago by Phil Jerome, who spent 15 years at Zenith, latterly as business development director. It specialises in medium-term car mini leases of three to six months.

So what’s different from existing mid-term rental deals, you might ask. Jerome claims Meridian’s unique selling propositions include: supplying a new car, prepared and delivered by a franchised dealer with a professional handover; cars sourced to order with a choice of colours and specifications; premium brands, such as Volvo and Mercedes-Benz, typically high spec with sat-nav and Bluetooth; and immediate availability.

“In addition, the cost is comparable to standard three- and four-year leases but the customer has the flexibility to hand them back early in many cases, although they can also be retained for as long as required,” Jerome says. Mileage pooling is also available.

Jerome has deliberately kept a low profile to date – Meridian doesn’t even have a website. “It wasn’t a priority because we knew who we wanted to do business with – the contract hire and fleet management industry,” he explains.

“We didn’t want to be too visible because we were trying to do deals with manufacturers as well. So keeping a lower profile has been useful.”

The Meridian concept was conceived by Jerome while he was at Zenith. The leasing provider was an advocate of only providing company cars to starters after three months to reduce the risk of reallocations, but the option of a rental car often resulted in a low quality, poorly maintained model.

“They tended to be older cars with damage on them and not best presented or clean,” Jerome says.

His initial response was to launch Ignition with a captive lender but when he wanted to move to a multi-lender model, Jerome had to reconstitute the company and set up Meridian. It is now backed by Close and Lombard, although the products and the customers are the same.

Those customers include nine leasing providers and a handful of brokers, with rental fleet of 250 vehicles, all bought outright by Meridian.

“We buy for stock with a core range of models to fit different grades,” Jerome says. “We expect to buy 400-500 cars this year. It’s fast-paced: we are working towards buying 1,000 cars a year within three years.”

The cars are typically kept for six to eight months. This means they do not require a service, cutting out a major expense, while it is also the peak time to sell from a residual value point of view.

Given the discounts Meridian has negotiated, selling a car after six months or so “is as close to what we paid for them as it will get”, Jerome says. “After that, the depreciation curve starts to steepen.”

Buying at a higher specification than run-of-the-mill rental cars also helps to keep residuals high; they are purposely selected to appeal to retail customers. Appreciation of used car demand also explains why the company has yet to dip into the electric car and hybrid market. “If we take the risk, we have to understand the pace of change in battery range and technology,” Jerome says. “It makes it difficult to predict what they will be worth. But we are watching the market and do intend to have them in our offering.”

He also pays close attention to manufacturer activity in the market. Heavy registrations could unsettle residual values if there are not enough buyers for the cars when they return to the market.

The primary disposal route is back through the franchised dealer network, although some models go to auction and some are sold via car supermarkets and other independent outlets. Everything is refurbished to retail-ready condition via a partner.

Consequently, Meridian is almost a virtual business: dealers stock and deliver the cars nationwide; a network of partners carries out inspections; another partner does the refurbishment work. Such low overheads enable Meridian to offer rental rates at near-comparable levels to traditional contract hire.

“Because we have no servicing and we are buying well, you can get to a level that is similar to a contract hire car,” Jerome says.

Now he is looking to expand direct with fleets and points to the uncertainty over Brexit as a clear opportunity to secure business growth.

“These scenarios make people wonder about uncertainty over contracts and staff which makes them reluctant to put them into three- or four-year contracts,” Jerome says. “We expect to see more companies looking at a percentage of their fleet as six-month cars that they can hand back after a period of time. This way they can downsize if necessary without incurring big penalties.”

He intends to focus on corporates which have a fleet manager; they will be most receptive to unbundling their services. Meridian will begin to offer more flexible contracts of three, six, nine and 12 months, which could involve a mid-term change of car, to widen its appeal, but recognises that the key is to keep it simple.

Customers are most likely to be perk car fleets due to Meridian’s premium brands, although it is considering expanding its range, with more premium marques but also the addition of volume brands.

“Our priority is to increase our customer base, increase the number of cars we have on the fleet and increase the number of cars we have with each customer,” Jerome says.

Cars only but vans may be added in future

Meridian claims to be able to supply a car on a mid-term rent within just three or four days of the booking. It typically buys a month in advance and supplies customers with a list of available cars.

Half the bookings are made through the electronic 1Link system; the rest are incoming calls. Most are required at short notice, usually within a week, although some companies do plan further ahead.

The fleet consists of cars only, although the company does receive enquiries about vans. Phil Jerome doesn’t rule out adding them to its mid-term offering, but recognises that they are more complex.

“It requires a lot more thinking,” he adds.

Using strategic partners for inspections, appraisals, repairs and delivery makes for an efficient business model with minimum direct overheads. In addition to Jerome, Meridian employs just three other people in the business.

Finance director James Cohen is a former chief finance officer at Budget Rent-a-Car and finance director of Hertz and brings credibility when talking to funders; Gemma Raines is client services manager; Lorna Reidy is fleet administration.

“We have a low headcount because we are a virtual business; it is a very efficient model,” Jerome says.